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    The Introduction of the Revenue Model, and the Decline of Frequent Flyer Programs

    The implementation of the revenue model in frequent flyer programs is still in its genesis, but it's fairly safe to assume that membership numbers will begin to decline as more and more travelers see through the PR fašade.
    The Introduction of the Revenue Model, and the Decline of Frequent Flyer Programs


    Feb 09, 2015

    It's an all too common occurrence for those of us who have yet to join the ranks of a frequent flyer program: We wait near the back of the pack, clutching our "Zone 4" boarding passes like peasants in a Shirley Jackson novella, as the overhead speakers announce boarding for the seemingly endless stream of arbitrarily-titled frequent flyer program tiers - gold, bronze, sapphire, star, star-plus, platinum, emerald, myrrh, what have you.

    Cue the collective sigh of relief from the program-less, austere travelers, whom thanks to 2015's introduction of new frequent flyer program models, won't be forced to wait for hours at the back of the boarding line - well... probably.

    Until January 2015, most frequent flyer programs, regardless of carrier, worked on a distance based calculation, where the number of frequent flier miles accumulated per flight was directly correlated to the distance flown. With the arrival of the New Year, a slew of changes have been made to many (if not all) major frequent flyer programs, the most prominent being the introduction of the revenue model.

    What is the revenue model you ask? Here are the basics: In the past, the secret was to find the cheapest ticket that covered the greatest distance, in essence paying as little as possible for the greatest accumulation of earned air-miles. Discounted airline tickets purchased through websites such as Travelocity and Expedia yielded the same amount of frequent flyer miles as an identical ticket purchased for full price at the airport counter, but the revenue model shifts the calculation of earned air-miles from distance traveled, to how much the ticket costs, regardless of how far you may travel on said ticket.

    Carriers such as Delta claim that their new revenue based system caters directly to its "most loyal customers," business-class flyers, whom on average spend more per-ticket, and will therefore receive significantly more air-miles than their coach flying counterparts. But what Delta and other carriers have failed to recognize in their re-structuring of frequent flyer programs - to accommodate for the "most loyal," business-class customers - is that historically the allure of frequent flyer programs is the cost-reductions they can provide to the average customers.

    Yes, air-miles can still be accumulated via discounted tickets, but at a drastically reduced rate when compared to the miles earned from premium tickets. Of course, the travelers who spend thousands of dollars on a top-quality airline tickets will still receive more air-miles, but those willing to regularly spend that kind of money on plane tickets probably don't need, or care, about frequent flyer miles anyway. If the only realistic method of stockpiling air-miles for future travel savings is through the purchase of high-priced airline tickets, the increase in cost to accrue air-miles now, essentially cancels out the potential savings those miles could provide down the road. In effect, the revenue-based frequent flyer model eviscerates the core customer base, failing to provide even a semblance of incentive for the normal-coach-flying-traveler to sign up.

    Since the inception of frequent flyer programs in the early 70's, the driving force behind their proliferation has been to garner brand recognition by rewarding loyal customers with incentives and perks ... the most prolific of which is frequent flyer miles. For the most part, providing complimentary services in exchange for brand loyalty has paid off handsomely for the airline industry, (Delta alone has over 92million SkyMiles members as of 06/14), but with the revenue model in place, the biggest benefit of joining a frequent flyer program - the accumulation of air-miles - is no longer as enticing to prospective customers due to the exceedingly expensive ticket purchases necessary to secure enough air-miles to actually travel anywhere.

    The implementation of the revenue model in frequent flyer programs is still in its genesis, and its long-term effect on the public's perception of such programs is still largely unknown, but it's fairly safe to assume that membership numbers will begin to decline as more and more travelers see through the PR fašade, and realize the eligibility costs greatly outweigh program perks. Airline companies may boast their revenue-modeled frequent flyer programs as a way to "better reward our most loyal customers," but those statements belie their true-intentions - to protect their bottom line. In an industry crippled by fear, political strife, and economic instability, the re-structuring of existing frequent flyer programs to squeeze a few extra dollars out of "loyal" customers is the absolute antithesis to the kind of forward-thinking innovations the airline industry desperately needs to re-emerge from the shadows of its post 9/11 depression.

    Until the public backlash reaches a deafening crescendo, loud enough to convince airline companies to re-tool their revenue-modeled frequent flyer programs, have faith in the fact that as each day passes, our "Zone 3" and "Zone 4" boarding passes become more attractive - allowing us to get to our seats in record time, with less and less "silver-club-platinum-star-rewards-members" holding up the line.

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